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Officers
Officers often serve as directors, in which case they are known as "inside directors." The principal corporate officers, or executives, are at the top of the corporate triangle. These officers execute policies that supposedly have been fixed by the board of directors. The daily operation of business is usually delegated to the corporate officers. The appointment of an officer may be for a term. Officers may be removed by the directors at will, even if no cause exists. The designation of officers is usually done by the corporation through the board or by designation in the bylaws. Often one finds a president, one or more vice presidents, a treasurer and a secretary. Officers have a fiduciary duty to the corporation since they are corporate agents. The corporation's executives and operating management are said to derive their authority "power" and legitimacy from the board. Statutes usually say little about the actual power of an officer. Determining the power of the officers to bind the corporation is an important issue that is usually based upon agency law principles. Officers are agents of the corporation and the coropation as an artificial entity can only operate through its agents. In order for an agent to have the power to bind the principal there must be either a grant of authority from the principal or other policy considerations that dictate the result. There are three significant ways that an agent may bind the principal - express, implied, and appraent authority. In each case the authority comes from the principal (i.e., the corporation). Express actual authority is present where teh principal expressly endows the agent with authority. For example, express authority exists when the board or president tells a manager of one of its stores to hire employees. Impolied actual authority exists where the principal implicity gives the agent authority to act. This implication can result from the manager's title or by the behavior of the principal. For example, the manager may purchase goods for a store to sell even though the manager was not expressly told to do so. If store managers in her position usually have authroity to buy goods to sell, teh authroity is impleid by teh principal having given her the position. if the store manager acts adn teh principal acquiesces in teh actions, authroity may also be implied. The owner would be bound by the manager's purcahses. Apparent authority is created when the principal manifests to third parties taht the agent has authority to act (express and implied results from the manifestation from the principal to the agent). IN most cases of apparent authority, an implied authority may coexist. In naming someone as manager, the principal creates implied authority to the manager with the authority that managers are expected to possess and similarly through apparent authority to third parties who would reasonably assume she had the authority of a manager. However, if the owner had told the manager not to order goods but she did so anyway and the third parties did not know of her lack of authority, the owner could still be liable under the concept of apparent authority even though there was no impleid actual authority. There is liability beacuse it is reasonable for third parties to assume taht the manager had the authroity and to rely on that assumption. While the agent may be liable in that case to the principal for exceeding her authority, third party transactions are protected. If an officer exceeds her authority, the principal may ratify the authority either expressly, or implicitly, as for example by accepting the benefits with knowledge of the consequences. For example, if an employee buys goods for a store without authority and the owner retains the goods with knowledge and later sells those goods, the owner has ratified the purchase of the employee. In the corporate context determining authority may not always be clear. Express authority may be found in the bylaws, corporate resolutions made by the board, or properly approved employment contracts. Senior officers usually ahve the power to create authority in other employees. THe impleid authority will dpeend on the position held and customs. When questions arise as to whether an agent has authority to act on behalf of a corporation pariticularly on a significant decision, one shoudl make sure the corporatino agrees to be bound by his or her acts. To do so, the party may seek a board resolution certified by the secretary, a writing signed by someone authorized to give authority or an opinion of the corporate attorney that there was proper authorization. While the legal model describes allows flexibility in board structure and officer power, the usual management structure of publicly traed corproations centralizes power in the chief executive officer and senior officers. While concerns have been expressed over this power and the need to strengthen the independent directors' monitoring, this structure will remain the norm given the business necessity of full time insiders managing the company.